Globalization and Politics

In political science globalization refers to the integration of separate nations, regions, or even
individuals into a wider global system. It is characterized by increasing the linkages and
connections between peoples and countries and by the growing knowledge of these interactions.
This integration process can affect the economy, polity, society, or culture; that is, the definition
of the process is very general and can refer to economic, political, social, or cultural integration.
The question of who is being integrated is also left open, although in political science it is mostly
the countries themselves that are at issue. The way in which such integration operates is also
variable. The most common form of globalization in the literature involves the economic
integration of national economies into a wider global one, usually through international trade,
capital flows, labor movements, and global production networks. For some authors, this means
the integration of countries into a global capitalist system—that is, one based on private property,
limited government intervention, and the use of markets to allocate economic value. Some term
this neoliberal globalization. Capitalism, international capitalist groups, and neoliberal practices
all spread throughout the world as globalization proceeds. Whether this is good or bad for
countries and individuals greatly depends on a scholar’s perspective. Some associate
globalization with the homogenization of distinct groups; one example is the loss of many local
languages and the increasing diffusion of the use of English. Others associate it with the
domination of American (or Anglo-American) values, beliefs, and practices. The global turn to
liberal democracy is often cited as an example. Globalization is not complete at this point.
Countries have different levels of integration into the world system. The extent to which a truly
global system—whether economic, political, or social—exists is a point of debate. The causes
and consequences of globalization are also debated.

Outline
1. Introduction
2. The Causes of Globalization
3. Consequences of Globalization
1. Economic Growth
2. Poverty and Inequality
3. Politics and Democratization
4. Conflict
5. State Capacity to Govern and International Cooperation
6. Convergence Among States
7. Domestic Economies
8. Limits of Current Research
4. Globalization and the Future
5. References

Introduction
Globalization has both secular and cyclical aspects. For some, the roots of globalization are in
technological changes, such as the lowering of the costs of communications and transportation,
which make the movement of people, ideas, goods, services, and capital faster and less costly.
These changes are irreversible and often increase over time. While countries and their
governments may try to put up barriers against such changes, it is very difficult for them to
successfully fend off the pressures of globalization. In this view, globalization has been
increasing steadily over time as technological change makes the world ever smaller. Sometimes
technological change is treated as exogenous—that is, it has sources other than countries’
policies or global integration. Other times, globalization itself, especially via trade of capital
flows, is seen as having an impact on technology; it usually is conceived of as helping induce
innovation and speeding its transfer around the world. Globalization and technological change
may then go hand in hand, each encouraging the other.

On the other hand, globalization has been viewed as cyclical; high levels of global integration
have been associated with two distinct periods in recent history. In the mid- to late 19th century,
a global economy emerged as the European powers, especially the British, forged an open
economy using both military power and economic policy. The development of colonies around
the globe and the extension of European trade, capital, values, and political power undergirded
this period of globalization. In the late 19th century, the world economy attained levels of
openness that had never been seen before. In some areas such as the movement of labor, such
levels of integration have never been achieved since. This open economy collapsed in the early
20th century with the two World Wars and the Great Depression. From 1914 to 1945,
globalization was in retreat. Protectionism became the dominant trade policy for many countries;
trade and currency blocs formed regionally, often around one powerful country, and military
conflict was prevalent. Nationalism, isolationism, and regionalism marked this 30-year period.
Globalization thus declined during this period.

However, after 1945 the United States picked up the mantle from the British and began to forge a
world economy through the creation of international institutions, an open economic policy, and
an internationalist foreign policy. The global system, however, was divided into at least two
blocs with the United States on one side and the former Soviet Union on the other; hence,
globalization would always be limited in this Cold War system. The United States pressed ahead
with the organization of an open, capitalist economy guided by principles embodied in various
international institutions. It worked to encourage democratization in certain regions and then to
include democracies in this integration process. The creation of the General Agreement on
Tariffs and Trade (GATT) and the subsequent development of the European Community started
a process of trade liberalization among developed countries. The Bretton Woods monetary
system supported by the International Monetary Fund (IMF) and the World Bank helped
countries establish currency convertibility and a fairly stable world monetary system based on
the dollar. This stability provided the conditions for the development of private international
capital markets, and over time these markets have come to dwarf those for goods and services.
The removal of capital controls from many advanced economies in the 1970s and 1980s, after
the termination of the Bretton Woods fixed-exchange rate system, opened these economies even
more to global markets. While labor flows never became as free from government intervention
as those of capital and goods, largely because of immigration restrictions in the developed world,
there was some return to the greater mobility of labor that had prevailed in the late-19th-century
period of high globalization. The extension of the European Union (EU) to new sets of countries
and new issues also characterized this integration movement. By the 1980s, most of the advanced
industrial world, except the former Soviet Union and its satellites, had joined the world capitalist
economy. Globalization was only partial in this period.

From the 1980s onward, the rest of the world’s countries began opening their markets and
borders even more and joining the world economy. The end of the Cold War, the collapse of the
former Soviet Union, and the economic reform movement in China all added impetus to the
globalization process, as the former communist countries and China all began to integrate their
economies into the global capitalist one. In the 1990s and early 2000s, the world’s developing
countries began joining this world economy and its international institutions in large numbers.
Most countries in the world now belong to the World Trade Organization (WTO), the IMF, and
the World Bank. Democracy was also spreading throughout much of the world at this time.
Countries also increasingly chose to join a wide variety of international organizations and treaty
systems. Conventions on labor standards, human rights, environmental issues, and other areas
became widely adopted by countries around the world. By 2009, most of the world’s countries
had become part of a global system that had become increasingly organized around a series of
common principles and values governing numerous issues. Economic shocks, such as the 1998
Asian financial crisis and the 2008 financial crisis begun in the United States, spread across the
globe rapidly. The second period of globalization had arrived. A major issue is to what extent
globalization was purposefully constructed, rather than unintentionally realized. Whether
globalization is reversible or not is also at issue.

Globalization has been studied from two general perspectives. On the one hand, the causes of
globalization have attracted much attention. Why has there been a movement toward increasing
contact and interaction between states and peoples all over the globe? Why has this occurred
more at certain times than others? Why have some regions or peoples been more involved in this
process than others? Why have certain aspects of globalization such as international trade moved
faster than others? Many questions have been raised about globalization as an outcome that in
itself needs explanation. On the other hand, the impact of globalization has also received great
attention. What effects does this process of increasing contact and interaction among states and
peoples have on the economy, politics, society, and culture? Are these effects large or small?
Negative or positive? Delineating the myriad effects that globalization might have and
developing evidence for these has been central to the literature. Once we understand more about
globalization, we can then address the question of how to manage the process and its effects.

The Causes of Globalization

A question of much import has been how globalization has developed, and why it has developed
the way it has. If one adopts the secular view of globalization, then its advance can be explained
by how fast technological change occurs and spreads. In periods where such change is very rapid
and when the adoption of new ideas and techniques is quick, globalization will progress rapidly.
Many seem to feel that this was the case in the mid- and late 19th century, when critical
innovations such as steam power, railroads, and the telegraph changed political, social, and
economic life around the globe. Spread in part by military competition and imperial control,
these technologies helped integrate distant regions of the world. Technological change did not
stop in the interwar period when globalization was in retreat; indeed, war tends to spur such
innovation. But the spread of such technologies in this period was much more limited since many
borders were closed and countries guarded their new secrets, which were often tied to war
fighting. The development of nuclear weapons is a case in point. The period after World War II
has again been viewed as one when rapid technological change was fostered by governments,
when the spread of new processes and products was unhindered, and when the adoption of
innovations at least in the noncommunist countries was embraced by states. Globalization thus
sped up after 1950 because technological change accelerated.

It is important to note that technological change is not just about the economy; such changes
have major ramifications for society, culture, and the polity. Electricity, the telephone (not to
mention the mobile phone), radio, television, refrigerated shipping containers, automobiles,
airplanes, and now the Internet—to name just a few of the major innovations of the last century
and a half—have affected social, political, and cultural life in enormous ways. They have all
contributed to globalization by reducing the cost of transportation and communication among
individuals across the globe. In this secular story of global integration, countries can try to
impede innovation and slow its spread, but they cannot ultimately halt such change. To the
extent that technology reduces transportation and communication costs, technological innovation
provides an irrepressible force for globalization. The pace of globalization may be affected but
not its forward movement.

In the cyclical view of globalization, other factors are often cited as being of great importance to
the changes we see. One theory focuses attention on the salience of having one country lead the
globalization process. Hegemonic stability theory (HST), developed in the 1970s and 1980s,
argued that a single world leader was necessary for an open, stable world economy. Without
such a leader, even technological change would not bring globalization. Two versions of this
theory exist. In one, the hegemon, who has overwhelming capabilities in all areas relative to
other countries, exercises a benign influence over the rest of the world by organizing and paying
the costs for such openness and stability. It plays the role of leader and others benefit from its
efforts. The United Kingdom (UK) and the United States are cited as two examples of this in the
mid- to late 19th and mid- to late 20th centuries, respectively. The loss of British leadership
capacity and the failure of the United States to exert leadership in the interwar period were seen
as the leading causes of the closure and turmoil of that period. Without such benign leadership,
the world would not be able to integrate and countries would remain in an isolationist stance
trying to beggar their neighbors. The hegemon solves the problem of trust and competition for
the smaller states and thus allows everyone to emerge better off through its provision of global
public goods. It acts as lender of last resort and tries to provide an open market in difficult
economic times. By creating international institutions to help countries in difficult times, the
hegemon can also promote stability and bind itself to reassure other countries of its benign
motives. Globalization requires leadership from the world’s strongest power. Some note that
perhaps a small group of powerful countries could provide this same leadership, but concerns
about disagreement or buck passing within this group have shed doubt on this view.
In a second view, the role of the hegemon is not seen as selfless. Here the global leader seeks to
maximize its own interests and uses its superior resources to bribe and coerce others into
following it. British and American hegemony is seen as a coercive process by which the country
imposes its will on others; the hegemon gains, while everyone else submits. In the British case,
imperialism combined with open markets and the dominant role of the pound helped it induce
others open their markets and join the international trading and financial system. Even
international law as developed in this period served to enable globalization as the European
powers used it to force open the colonies. British domination ran into increasing difficulty,
however, as other countries grew and became competitors. Once Britain could no longer dictate
the terms of engagement with the world economy, regional blocs developed around the strongest
powers. Britain could no longer force countries, including the United States and Germany, to
follow its preferred practices, such as joining the sterling system or opening their markets to
international trade. The decline of British hegemony then ended the period of globalization as
powerful rivals developed their own spheres of influence.

In the case of the United States, its dominance in all domains after World War II helped it
establish a system of international governance that has maintained American hegemony for over
60 years. Unlike the British earlier, the Americans set up a series of international institutions to
embed the U.S. global order. The GATT/WTO, IMF, World Bank, and regional development
banks have, among others, been a means for the United States to exercise its domination without
having to do so directly. These institutions have pushed countries to adopt capitalist practices, to
open their markets to flows of goods, services, and capital, and to follow the so-called
Washington Consensus in other economic matters. Allowing or encouraging countries to become
indebted and then imposing conditions on them when they are unable to service their debts has
allowed international institutions to open the developing world to the global economy. More
recently, pressure for democratization has also come from these institutions. Thus, the American
method for controlling the global system has differed from the British one, but it has also
involved coercing others to join the global economy. The use of soft power has been perhaps
more evident in the case of the United States. But American military intervention around the
world has been plentiful, and this view has served to enforce its global vision. In this view of
coercive hegemony, first the UK and then the United States gained much from their exalted
position at the center of the global system; ironically, however, in both cases their decline seems
to be connected to their leadership role. This view of the malign hegemon is associated with both
a realist and a Marxist approach to international relations. Substantial debate exists as to whether
the coercive or benign view of hegemony is more evident. This debate includes controversy over
the extent to which the countries other than the hegemon have been hurt or helped by this
globalization process.

A more constructivist account of the globalization process would focus on the way ideas and
norms about the global community and modernity shape state behavior. It would identify the
dominant ideas of the past 60 years and how these have been legitimated and spread throughout
the system. Beliefs in liberal democracy, human rights, capitalism, and neoliberalism, for
instance, have diffused across the globe; these institutions and practices have become legitimated
and viewed as the “modern” way to manage a country. Countries thus aspire to introduce and
develop them in order to be a part of the global community. International institutions embody
and diffuse these ideas, as do norm entrepreneurs from global civil society. The focal effect of
these ideas, however, is to reduce diversity and contribute to homogenization. Scholars are often
divided as to whether this normative globalization is beneficial or not. Clearly, the spread of
some ideas (e.g., democracy and human rights) is seen in a more positive light than the spread of
others by some scholars (e.g., capitalism and neoliberalism). There is also debate over how
certain ideas come to be dominant. Is it through coercion or inducement by a powerful country,
such as the United States, that others espouse these ideas? Is it more the zeitgeist of the time that
makes certain ideas fit the situation better? Or is it the impact of international political
entrepreneurs who give legitimacy and moral suasion to certain views, independent of countries?

Another reason given for the rise of globalization is much less intentional. The uncoordinated
actions of countries over time have simply resulted in an increasingly open and interconnected
system. No country desired such a result, but each one acting on its own best interests adopted
policies that resulted in a globalized world. This view has support since the reasons for and
sequencing of many countries’ decisions to globalize were nationally distinctive. The advanced
industrial countries liberalized trade and then their capital markets back in the 1960s to 1980s.
The EU was a major force for movement in this direction; however, European countries joined
and expanded the Union for reasons other than globalization, such as domestic politics or
international security. China then launched its economic reform program in the late 1970s and
early 1980s for internal reasons, and political reforms have not been forthcoming. The former
communist countries only moved toward a more open and capitalist economy after the end of the
Cold War and the demise of the former Soviet Union in 1991, and for many of them, joining the
EU had important domestic political and international security motivations. In the developing
world, democratization often came before economic liberalization. Many poor countries did not
liberalize economically until the late 1990s and later. Indeed, the most striking is the different
paths that countries have taken since the 1970s. The manner in which and the degree to which
countries are integrated into the world system are remarkably varied. While the overall trend has
been toward greater contacts and openness, there has been substantial diversity in how states
realized this. For instance, English is spoken much more in most countries today than 30 years
ago, but the penetration of English varies greatly from country to country. In this view, this
uncoordinated process has been driven by different causes in each country. Globalization has
developed differently for each; and the fate of globalization lies with the (somewhat
independent) decisions of countries. The reactions to the global financial and economic crisis of
2008 to 2009 underline this view since governments have failed to coordinate and have instead
responded distinctly.

Consequences of Globalization
In addition to the debates over the causes of globalization, there is much debate about its
consequences. There are at least three distinct views in the literature: (1) Whereas some see its
consequences as negative in all aspects, (2) others see its effects as positive on the whole, and (3)
still others stand firmly in the middle and see it as having both costs and benefits. Globalization
is said to have many different effects. The approach here is to look at a number of those effects
and sketch out the different opinions scholars hold on each. At this stage, there is little consensus
on its effects. Substantial literatures exist on whether (and how) globalization has affected
economic growth rates, poverty, inequality, democracy, conflict, state capacity, policy and
institutional convergence, cultural diversity, volatility and the diffusion of crises, and balance of
power between capital and labor. Assessing the impact of globalization implies that one must
hold other factors constant, which is a difficult task. Since globalization is an ongoing process,
definitive answers to these questions cannot be given. What is striking, however, is the wide
range of views and evidence that exists for each of these outcomes.

Economic Growth
Globalization is alleged to have had a variety of effects on economic growth. Growing
integration of national economics into a wider global one has usually been achieved through
trade liberalization and the pursuit of foreign investment, and sometimes through capital market
liberalization. The consequences of these policies for economic growth are still debated. Some
research supports the idea that all of the policies increase growth; there is probably more
evidence that trade and foreign investment support growth than does capital market
liberalization. Research also shows evidence that countries that globalized in the past 30 years
grew faster than those that did not. Many expected that the integration of developing countries
into the world economy would promote economic convergence—that is, it would make the
poorest countries grow faster and hence catch up over time with the richest. There is some
evidence that this has occurred in parts of the world—mainly Asia—but not much support for it
globally. The North–South divide does not seem to have closed much over the past few decades.
In part, this is because the North has had faster growth rates than some developing countries. For
a wide range of countries, however, globalization does not seem to have fostered faster growth.
Scholars point out that for parts of Latin America and Africa growth rates were higher in the
decades before the 1980s than after. The impact of trade on growth for many countries has also
been ambiguous; some, especially in Asia, seem to have gained from it. But many others, in
Latin America and Africa, for instance, do not. Foreign direct investment has tended to flow to
the most rapidly developing economies and so it is associated with fast growth, but this may not
be causal. Finally, there is much skepticism that capital market liberalization for developing
countries is or has been good for economic growth. Some of the problems associated with
globalization, such as inequality and volatility, seem to have affected its capacity to deliver
growth.

Poverty and Inequality

A large debate centers on the impact of globalization on poverty and inequality. World Bank data
suggest that from the early 1980s to roughly 2005, poverty declined globally. The number of
extreme poor (those living on less than $1.25/day) decreased from 1.9 billion in 1981 to 1.4
billion in 2005, which is equivalent to a decrease from 50% of the developing countries’
population to 25% thereof (World Bank Annual Report 2009, p. 61). Also, for example, in the
East Asia and Pacific regions, the percentage living on less than $2 a day fell from 69% in 1990
to 25% in 2007. Nevertheless, 2.5 billion people in the world still live on less than $2 a day
(World Bank Annual Report 2008, pp. 14, 34).
Other measures of the quality of life in developing countries have also improved: Literacy rates,
life expectancy, and infant mortality, for example, have ameliorated in most regions except
where HIV/AIDS has struck hardest. Was this decline due to globalization? Some countries that
have lowered trade barriers and promoted foreign investment, such as China, Taiwan, and
Vietnam, have experienced significant declines in poverty in the past decades. However, even for
these countries, it is not clear that within-country inequality has been reduced; the growing rural–
urban divide in many developing countries suggests rising inequality. Many other countries have
seen little change in poverty levels, and inequality has either remained fairly constant or risen.

The World Bank associates greater globalization with increased growth, declining poverty, and
falling inequality—especially globally. But other data call this optimistic scenario into question.
A number of studies of trade have shown that its liberalization in developing countries does not
reduce poverty or inequality. The so-called skill bias associated with trade and foreign
investment today often means that more highly skilled workers gain more from international
integration than do low-skilled ones, which tends to exacerbate the degree of within-country
inequality. Interestingly, inequality seems to also have risen recently in the developed countries.
This outcome was not unexpected. Standard models of trade suggest that in rich countries, high-
skilled workers should gain the most from globalization and low-skilled ones should be the
losers; this is the opposite of what should happen in the poor countries. This seems to have
occurred in a number of developed countries, although it has probably been tempered by the
redistributive effects of the welfare state. Inequality has thus risen in a number of developed
countries.

The more surprising outcome has been that low-skilled workers in the developing world have not
done better. While there are now numerous reasons articulated for this result, it is a problem for
poverty reduction and equity in the developing world, especially since these countries by and
large do not have well-developed welfare states. The impact of financial crises and their
diffusion in a global system are also concerns with regard to poverty and inequality. Some argue
that such crises are more likely, more intense, and spread more broadly in a globalized world.
Others point out that with an open economy domestic and international shocks may balance each
other out and actually make the system more stable. There is little doubt, however, that these
financial shocks can have negative consequences for countries. The Asian financial crisis of the
late 1990s and the recent global financial crisis have both increased poverty and inequality. How
governments shape the globalization process in their countries seems to be important in
influencing the way globalization affects poverty and inequality. This suggests that countries will
have quite different experiences with globalization.

Politics and Democratization

Globalization has also been credited with having effects on politics. Some argue that it has
helped spread democracy and put pressure on leaders to democratize. Democracy has certainly
increased globally since the 1980s. But has this been due to globalization? Globalization through
an open economy or through international pressure generated by international institutions or
norm entrepreneurs may induce leaders to adopt more democratic forms of governance if they
want to be members of the international system. Some argue the reverse: Democratization was
necessary for the change in policies in many countries that led to greater globalization. The
causal connection between democratization and globalization is much debated. There is also the
difficult question of whether democracy and globalization are compatible. Political regimes
practice democracy within their boundaries, and publics see their governments as responsible for
the outcomes they experience. But in a globalized world both of these may be compromised.
Democracy may have little meaning if the most important outcomes result from global forces
and if governments can do little to affect these forces. The supposed democratic deficit in the EU
is one manifestation of this problem. The growing number of international institutions may also
be a related concern. Many of these institutions are established to facilitate international
cooperation and prevent countries from pursuing beggar-thy-neighbor policies. But if they take
decision-making power away from governments, they may undermine democracy at home and
the public’s faith in it. Others have argued that democracy may be enhanced by such
international institutions. The spread of democracy and this wave of globalization seem to have
gone hand in hand; how countries react over time to a highly globalized world may or may not
be propitious for democracy.

Conflict
Globalization may have an impact on conflict as well. The frequency of international wars has
declined steadily since the World Wars, but civil wars had risen in frequency until recently.
Some research suggests that aspects of globalization can reduce conflict, especially interstate
war. Research has shown that increased trade among countries, increased foreign investment,
and trade agreements are all associated with less international conflict. The so-called
international capitalist peace is one example of this argument. International institutions also seem
to have a similar relationship: The more of them a country joins, the less likely it is to get into
military conflicts. There do not seem to be similar connections for civil war. On the other side of
the ledger, however, as countries trade and invest more with each other, they become more likely
to have trade and investment disputes. Over time these can exacerbate, if not create, conflicts.
Furthermore, as distant countries and peoples are brought into ever closer contact, the potential
for misunderstandings and disputes rises as their different cultures, values, and beliefs clash; the
so-called clash of civilizations is more likely in a highly interdependent world. As their
interdependence increases, countries also become more vulnerable to the actions of other states.
International economic ties have the potential to be used as political leverage. An interesting
example is the case of China and the United States in the early 2000s. The growth of trade and
investment ties between the two countries has resulted in very large and imbalanced flows of
capital and trade from China to the United States; these economic linkages can serve as potential
political levers for both sides. The relationship has become much more complex and fraught with
political stress. Some think that these ties will dampen any propensity to engage militarily; others
see them as potential sparks for a future conflict. Globalization may reduce tendencies toward
conflict by making it costlier since countries will have to break their economic ties if they fight;
or it may induce conflict as they have more and more linkages that can lead to disputes.

State Capacity to Govern and International Cooperation

Questions have arisen about the impact of globalization on state capacity. That is, does
globalization weaken countries and erode their capacity to govern? States are often judged by
their capacity to manage their economies, to respond to crises, and to provide public goods such
as health care, national defense, and education. As they become increasingly intertwined in a
global economy, states may lose the ability to manage their economies. The smaller the national
economy relative to the world economy, the more likely is this outcome. Countries will
experience the externalities of other countries’ policies but will often be unable to manage these
negative consequences. Losing control over monetary policy, especially if a country opens its
capital account and lets its currency float, is a well-known example of this. Tax competition
among states in a globalized world is another concern, since taxes provide the resources for
governments to provide public goods. The race-to-the-bottom phenomenon in general that is
associated with globalization can signal a country’s increasing loss of control over its economy
and perhaps its polity. As noted above, for democracies this loss of control can be especially
worrisome as it may induce a loss of public faith in the government and in democracy overall.

On the other hand, international cooperation and international institutions may help states
alleviate the problems associated with globalization. State behavior can create negative
externalities for others even in a system that is not very globalized. But without globalization it
may be very hard for states to cooperate to address these externalities. Globalization may awaken
states to the need for organized cooperation. It may induce the creation of international
institutions that help states deal with these externalities and thus provide greater political
capacity than otherwise. One can think of the EU in this light. The states within the EU may now
have greater capacity as a group to affect their economies than they did before joining the EU.
Individually they might not be able to manage the pressures of globalization but with an
institutionalized cooperative regime they may be much better able to do so. The recent interest of
countries such as Iceland in joining the EU after the 2008 financial crisis suggests such an
outcome. Globalization no doubt creates or exacerbates problems that do not respect national
borders, but it may also contain pressures that allow countries to better respond to those
problems.

Convergence Among States

Globalization has also been associated with policy and institutional convergence among states.
Some have suggested that as countries open their economies they become more likely to adopt
similar policies and institutions. This convergence process can be driven by different pressures.
Some attribute it to the power of the world’s hegemon; some, to the increased vulnerability of
states to the pressures of international institutions; some, to increased competition among states;
others, to a learning process undertaken by countries. Whatever the cause, this convergence
seems to have occurred in economic policy and institutions. The widespread adoption of
neoliberal policies, or the so-called Washington Consensus, has been notable since the late
1980s. Other examples are the decisions by many countries to create independent central banks
and to allow their currencies to float. This process has been remarked in other areas, from the
creation of bureaucracies to deal with science and technology issues to the turn to democracy
itself. Globalization may narrow the choices that states have and pressure them to adopt similar
institutional forms and practices. To the extent that these forms and practices result in better
outcomes, this process may be welcomed. However, if they are not productive for states, then
this convergence process may be a negative for governments everywhere.

When this convergence pressure extends to cultural and social life, it is often seen as a negative
force. Losing the cultural and social diversity that are associated with distinct regions, ethnic
groups, languages, and nations is an often remarked effect of globalization. The disappearance of
many languages and the increasing use of English are two such examples. For some, this is a
benefit since transaction costs are greatly reduced if all people speak the same language, and the
dream of a common global language has a long history. The pressure on countries or peoples to
curtail certain practices and rituals that are not considered “modern” or “civilized” is said to be
growing as well. Debate rages over whether countries have the right to condone all types of
practices within their borders or whether there exist certain minimal standards that all countries
must follow. And the end of some practices, such as slavery, has been widely applauded. The
decrease in both communication and transaction costs in a globalized world has obviously helped
intensify such convergence. External pressures to conform to global norms may be stronger
today than ever but such pressures have always existed. Today they are less likely to be imposed
through the use of force or conquest but that does not mean these pressures are less powerful.

Scholars also worry that a global system is an increasingly interconnected one where problems in
one country or region can spread more rapidly, forcefully, and widely than in a less
interconnected environment. The increasing ease of transportation, for example, makes the
spread of disease much faster and perhaps deadlier. The communications revolution does much
the same for new ideas and fads. Information cascades are more likely in such systems. This
means that instability may be greater as well. Small changes to the system radiate out in all
directions and can lead to large consequences. There is a concern that crises are also more likely
and more contagious in such a globalized world. The Asian financial crisis of the late 1990s and
the recent global financial crisis of 2008 to 2009 are two such examples. Some have argued that
the world’s largest economies have experienced a “great moderation” since the 1970s with a
dampening of business cycles and decreasing inflation due partially to greater international
exposure. Others see an international economy beset by rising volatility over time, as crises
multiply and spread. Globalization may stabilize a system by spreading problems out and
bringing counterbalancing forces to bear, but it may also destabilize a system by creating a
network of linkages among all countries and across all sectors that transmits and magnifies
problems.

Domestic Economies
In addition to the question about which countries gain and lose from globalization, there is the
issue of which groups gain and lose domestically. Many see globalization as strengthening the
hand of capital owners and right-wing political parties as opposed to labor owners and left-wing
parties. With a global economy where capital can move relatively freely, it becomes advantaged
domestically. Globalization changes the domestic balance of power between business and labor.
When owners of capital do not like a government policy or fear labor has become too strong,
they can often move to a new political environment that is more accommodating. This process
can then generate race-to-the-bottom pressures as governments try to retain capital in their
country by deregulating and adopting more business-friendly policies. Some claim that
globalization has helped undermine labor unions and other forms of labor market organization.
This process can then influence the political system. If right-wing parties represent business
interests more, they may be strengthened by globalization. Left-wing parties and their programs
may seem increasingly unattractive as they “scare” capital away and perhaps slow down growth.
Evidence for this effect is mixed. Some claim that left-wing parties and governments actually do
a better job wooing capital and thus are not disadvantaged by globalization; they may even make
better partners for international business than right-wing parties. Some scholars see no effect of
globalization on domestic politics; they claim that domestic political institutions filter and shape
such external pressures so that their ultimate effects are a function of domestic politics.
Preexisting domestic institutions and practices then govern whether and how globalization
affects internal politics. The impact of globalization on political power within and between
countries is a topic of debate and great importance for future research.

Limits of Current Research

The consequences of globalization could thus be widespread. They might affect economics,
politics, society, and culture. Existing research points out that globalization has affected
economic growth rates, poverty, inequality, democracy, conflict, state capacity, policy and
institutional convergence, cultural diversity, volatility and the diffusion of crises, and balance of
power between capital and labor. But it provides little consensus on the direction or magnitude of
these effects.

Globalization and the Future

Given the many consequences that globalization might have, one question that is often raised is
whether countries can manage its impact. This is especially important to the extent that
globalization has negative consequences. Many types of problems that have been endemic to
countries for centuries have taken on a new perspective in a globalized world. Problems that
were national have become transnational. The ability of countries to realize many of their basic
goals has become more and more tied to the actions of other countries. Economic prosperity
domestically often depends now on international trade and capital movements around the globe;
national security from all sorts of threats depends on the behavior of other countries and nonstate
actors; environmental conditions rely on the behavior of other agents globally; and public health
relies more and more on transnational factors and the behavior of international agents. Countries
have always faced such problems; it is just that their impact and resolution depend more and
more on agents outside the state itself. Globalization is intimately connected to this process. By
increasing contacts and interactions among countries and peoples, it helps make many issues
transnational in character, rather than national.

Given that governance is largely the domain of nation-states, is there anything that can be done
to address these transnational problems? One country can rarely dictate another’s economic,
environmental, security, or public health policy, for example. But to deal with transnational
problems, coordination of policies may be the best way forward. In particular, cooperation where
countries coordinate their policies to arrive at mutually preferable outcomes may be essential.
Globalization may facilitate cooperation; it may make the costs of failing to cooperate so high
that countries are more willing to try. But it may also make the stakes of cooperation much
higher and thus render it less likely.

International institutions may be one way to address these concerns. In a globalized era, some
see such institutions as essential for dealing with transnational problems. Countries alone cannot
successfully deal with them; they require changes in the behavior of other states. International
institutions that states voluntarily join and comply with may help them. Such institutions may
help states realize cooperative outcomes; they may provide transparency and lower transaction
costs for negotiating solutions to transnational issues; they may embody global norms and
practices that allow states to identify focal points for cooperation and/or help them enforce
compliance with international norms and cooperative agreements. These are the potential
benefits of global institutions. They may have costs as well. Not all international institutions
function adequately; some have serious internal defects that cause them to operate poorly. Others
are deadlocked by internal divisions. Some are dominated by one or two states that coerce others
to adopt their preferred norms and practices even if these are not very beneficial for the others.
International institutions cannot be seen as a costless and efficient solution to all transnational
problems. But many of them have shown some ability either to prevent transnational problems
for worsening (e.g., the WHO and the WTO in times of crisis) or to allow states to cooperate in
order to better manage problems in a globalized world (e.g., the EU).

A related issue is concern over globalization’s future. If one adopts the secular view of it, then
little chance exists that the increasing contact and interactions among peoples and countries can
be reversed. Indeed if there is technological progress, there is likely to be increasing
globalization; more and more contact and interaction are inevitable as technology brings people
in the world closer together. On the other hand, the more cyclical view suggests that
globalization comes and goes in waves depending on political, economic, and social reactions.
We may now be experiencing the height of this period of globalization. Forces for a backlash
against the pressure exerted by increasing contacts and interactions among peoples and states
may be gaining strength. The economic and financial crisis of 2008 to 2009 may be a prelude to
this type of backlash. In this view, governments can respond in ways that curtail or reverse
globalization; they can protect their economies, close their borders, end participation in
international institutions, and take other steps that seal them off from the rest of the world. The
period between 1914 and 1945 is one example of this. The question, of course, is what would be
the costs and benefits of such a course of action and would governments be able to achieve any
kind of meaningful autonomy or autarchy, given the technologies we now have and the public
expectations about their connections to the rest of the world. Whether globalization is reversible
or not is a question of great import; the costs of doing so would be a key factor. More realistic,
perhaps, are questions about whether globalization can be slowed down or managed in ways that
are better for all concerned.

In conclusion, debate rages about globalization. A number of theories exist about its sources.
Technological change, international political hegemony, global normative convergence, and/or
independent country reactions have all been cited as major causes of globalization.
Globalization’s effects have been debated in even greater intensity and breadth. Substantial
literatures exist on whether globalization has affected economic growth rates, poverty,
inequality, democracy, conflict, state capacity, policy and institutional convergence, cultural
diversity, volatility and the diffusion of crises, and balance of power between capital and labor.
Agreement on the nature of its effects on any of these is scarce. For some, the balance of its
impact has been negative in almost all domains; for others, it is seen as largely positive,
especially in the economic and political areas; and for yet others, it has costs and benefits that are
hard to calculate and summarize overall. One fact not in doubt is that globalization is an
important feature of our world these days; it seems to have consequences for all domains of
economic, political, social, and cultural affairs. How to manage it in order to make states,
peoples, or the world better off is thus of central importance.

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